DuPont de Nemours, Inc.

Good day and welcome to DuPont's third quarter 2022 earnings conference call. Please note today's conference is being recorded. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star followed by the number one again. Thank you. Chris McRae. Vice President of Investor Relations, you may begin your conference.

Good morning, and thank you for joining us for DuPont's third quarter 2022 financial results conference call. Joining me today are Ed Breen, Chief Executive Officer, and Lori Koch, Chief Financial Officer. We have prepared slides to supplement our remarks, which are posted on DuPont's website under the Investor Relations tab through the webcast link. Please read the forward-looking statement disclaimer contained in the slides. During this call, we will make forward-looking statements regarding our expectations or predictions about the future. Because these statements are based on current assumptions and factors that involve risks and uncertainties, our actual performance and results may differ materially from our forward-looking statements. Our 2021 Form 10-K, as updated by our current and periodic reports, includes detailed discussion of principal risks and uncertainties, which may cause such differences unless otherwise specified. All historical financial measures presented today exclude significant items. We will also refer to other non-GAAP measures. A reconciliation to the most directly comparable GAAP financial measure is included in our press release and also posted to DuPont's investor relations website. I'll now turn the call over to Ed.

Good morning, and thank you for joining our third quarter financial review. We posted strong quarterly results above our previously communicated guidance in an extremely challenging environment due to uneven macro conditions, and persistent inflation globally. Our revenue growth of 4% versus the year-ago period included solid organic growth of 11%. Customer demand remained strong across most of our key end markets during the period, highlighted by double-digit volume increases in select areas, including Cal-Res, Best Bell, Laird, Semi, Water, and Auto Adhesives. To combat persistent inflationary headwinds in raw materials, logistics, and energy, we continue to implement necessary pricing actions which have fully offset such headwinds to date. Given continued energy cost inflation, we now expect full-year 2022 inflation of about $800 million year-over-year, which we anticipate will be fully offset by pricing actions. Our third quarter results also demonstrated year-over-year operating EBITDA growth and margin improvement, reflecting DuPont's unique business mix, innovative solutions, and highly diverse end markets, as well as strong operational execution during the period. We are pleased to have reported strong performance during each of the first three quarters of 2022, and we remain firmly committed to continued strong execution in the coming periods. Turning to slide four, I will comment on the details of our transformation progress. First, last week's announcement that we completed the sale of the majority of our M&M segment to Celanese marks the completion of our last contemplated large-scale divestiture, for which we received $11 billion in gross cash. The M&M business is an excellent set of assets that we know will prosper, and we are confident that Celanese is the right owner going forward. We are excited by the prospect of proving to the market that our multi-year transformation has brought DuPont to a truly different place. After the Dow merger, followed by the spins that created the new DuPont, we have further transformed our business with large-scale deals, including the N&B split-off and now the M&M transaction. We further sold eight smaller businesses over the last three years, with proceeds totaling over $2 billion. We are starting the next phase of our growth from a position of strength, leveraging highly profitable businesses with strong and leading market positions centered in growing markets, as well as a healthy balance sheet. These assets include some of the best intellectual property in the respective industry verticals, with globally recognized brands familiar to us all, as well as the thousands of longtime B2B industrial customers. For DuPont, we are confident that our remaining mix of businesses offers a different dynamic with significantly lower volatility and higher expected long-term growth given our revenue mix. This is driven by a focus on secular tailwinds, including the 5G build-out and other electronics drivers, the global clean water infrastructure development, continued demand for safety and personal protection solutions, secular growth across multiple industrial technology verticals that we serve, and from next generation automotive growth. We believe we have built a portfolio that can perform alongside the best diversified industrial companies. Our businesses are aligned with secular growth trends, we deliver top tier levels of profitability, and we should clearly benefit from dampened business volatility compared to our portfolio from just a few years ago. These advantages are clear and will help us to generate superior shareholder value over time. Regarding the Delrin divestiture process, we continue to advance our internal work required to divest that business. We are being diligent with our overall marketing process to ensure we maximize value in proper market conditions and expect to have completed a sale in 2023. Before I move on, I'd like to briefly address the intended Rogers acquisition. We terminated this deal on November 1, which was the outside date of the transaction agreement originally signed a year ago. This was an unfortunate outcome in that the potential strategic fit of Rogers with our business was strong, and we saw a lot of opportunity, but were unable to secure regulatory approval for the transaction. We wish the Rogers team well. For DuPont, the inability to close the acquisition has no material impact on our ongoing business outside of the obvious loss of opportunity. We remain confident in the quality of our portfolio and its growth potential and will look to be opportunistic with select and targeted M&A moving forward. Shifting to capital allocation on slide five. With the receipt of the proceeds from the M&M sale, we are now able to accelerate our capital return options and further strengthen our balance sheet while maintaining flexibility to continue to grow the business through discipline and targeted M&A. Today, we announced that our board has authorized a new $5 billion share repurchase program, which expires June 30, 2024. We intend to act immediately and enter an accelerated share repurchase agreement for $3.25 billion of common stock, which includes the remaining $250 million under the previous authorization. We anticipate completing this ASR within about nine months, with 80% of the shares retired upfront during the fourth quarter. We would currently expect to complete the full $5 billion of repurchases within the authorization period. In addition, we will retire $2.5 billion of our senior notes due 2023 in the fourth quarter. The prepayment reduces refinancing risk in a rising rate environment while generating pre-tax annualized savings of over $100 million. Further, we plan to reduce our commercial paper balance to zero by year end, of which we had $1.3 billion outstanding at the end of the third quarter. In combination, this significant share repurchase authorization and our deleveraging plan demonstrates our continued commitment to returning capital to shareholders while maintaining a strong balance sheet. Our approach remains balanced and in line with our overall capital allocation strategy. We expect to finish the year with a leverage ratio significantly below our longer-term target, maintaining balance sheet capacity to further allocate excess capital to a combination of bolt-on M&A and potential share repurchases over time. Our M&A focus remains on targets that fit within our growth pillars and are aligned with key secular growth trends. With that, let me turn it over to Lori to discuss third quarter details as well as our financial outlook.